Question

Activity Levels and Cost Drivers Shroeder Machine Shop has the following activities:
a. Machine operation
b. Machine setup
c. Production scheduling
d. Materials receiving
e. Research and development
f. Machine maintenance
g. Product design
h. Parts administration
i. Final inspection of a sample of products
j. Materials handling
Required
1. Classify each of the activities as a unit-level, batch-level, product-level, or facility-level activity.
2. Identify a potential cost driver for each activity in requirement 1.

Answer 1

Answer:

a. Machine Operation

Unit level, No. of units produced

b. Machine setup

Batch level, No. of batch setup

c. Production scheduling

Batch level, No. of batch setup

d. Material receiving

Unit level, Unit of material used in production of a single unit

e. Research and development

Facility level, Research done and used in development

f. Machine maintenance

Unit level, No. of units made

g. Product design

Product level, Changed product designs

h. Parts administration

Facility level, No. of parts changed

i. Final inspection of a sample of products

Batch level, No. of batched inspected

j. Materials handling

Facility level, Quantity of raw material handled

Explanation:

a. Machine Operation

Unit level, No. of units produced

b. Machine setup

Batch level, No. of batch setup

c. Production scheduling

Batch level, No. of batch setup

d. Material receiving

Unit level, Unit of material used in production of a single unit

e. Research and development

Facility level, Research done and used in development

f. Machine maintenance

Unit level, No. of units made

g. Product design

Product level, Changed product designs

h. Parts administration

Facility level, No. of parts changed

i. Final inspection of a sample of products

Batch level, No. of batched inspected

j. Materials handling

Facility level, Quantity of raw material handled